Dow Transports test November lows

Interesting times for the Dow Jones Transportation Index (and for lovers of Dow Theory). One can only assume the Dow itself is heading for a similar test, but so far bulls have defended November lows in the DJTA.

The good news for bulls were the two higher volume accumulation days on tests of support. Combined with a sequence of bullish candlesticks on oversold stochastics. The concern is the increase in bearish trend strength after a period of cooling in the latter part of 2008.

Although the index appears to be attempting a double bottom, confirmation of this won't come until 3,728 is breached. Additional resistance at 4,058 (the former head-and-shoulder neckline) and the 200-day MA will keep the lid on any secular change from the bear trend.

But initial suggestions favour a short term play to double bottom resistance with a stop on a break of November lows.

Dr. Declan Fallon, Senior Market Technician, the free stock alerts, market alerts and stock charts website

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